10. July 2018

Young lawyers’ greed – or merely law firms’ lack of imagination?

Hardly any profession other than lawyers makes their law firm partners’ salaries and turnover figures publicly available in rankings. And this also applies to the lowest-rung employees.

To attract the right young lawyers, a new race started recently in New York: A month ago, Milbank was the first law firm to announce that it would pay first-year associates USD 10,000 more per year, i.e. a new annual salary of USD 190,000 – nota bene for lawyers who have just concluded their education and have no professional experience. Of course, the salaries of lawyers with professional experience are also adapted accordingly (8th year associates earn about USD 340,000). This step was justified with two arguments, among others: if they were not the first, then another law firm would make this adjustment first. And they – now along with all other law firms that follow – argue that these salaries would have to be paid in order to recruit the best talent for the clients.

Since this announcement, more and more law firms have followed suit, and not only in the U.S. Until very recently the assumption was that this salary race was only taking place among the elite, i.e. within the 40 most profitable law firms. Meanwhile, however, law firms ranked 60th to 80th also declare that they want to pay this higher salary. What is the reason behind this salary spiral?

First of all, the question must be asked as to the role played by the first-year associates’ (initial) salary. Are brand-new lawyers indeed such money-grabbers that they can only be baited with a high or even the highest salary? And would these presumed talents no longer apply for a job with another law firm that “only” pays the previous USD 180,000 at all, or at least not as their first choice? It is probably unnecessary to give special emphasis to the fact that it is impossible for all first-year associates to be talents, not even in top-notch law firms; statistical reasons alone would refute that.

If the salary seems indeed the only or at least the most important motivator for lawyers, which will then pervade all employment levels right up to partnership, lawyers should not be surprised any longer if the stereotype of the greedy lawyer is still hale and hearty (John Grisham comes to mind). In this case, they should not react with any sensitivity at all if their clients want to conduct the discussion about fees and remuneration in a tougher way, for instance regarding hourly fees, discounts and other reduction schemes. The combination of highly paid but still professionally inexperienced lawyers raises the justified question as to whether, as a client, you want to pay something for first-year associates at all, but in any case not the quoted hourly fee because you do not want to fund their (expensive) professional training.

In my view, though, the second complex of questions is much more intriguing: why do law firms enter this race – which is started anew time and again – at all? Is all this merely evidence of the classic lemming effect? You would think that as long-standing employers, they should understand the market and its requirements. Or do they really know their first-year associates better and know that they can only be attracted in this way? Consequently, they merely confirm the above-mentioned stereotype of the lawyer. Be that as it may: research in the field of human resources management, leadership and primarily (also monetary) incentive systems reveals something different and does not exclude lawyers from it, either. Furthermore, I have to ask the generation question, i.e. what significance should be accorded to young people’s values, much-vaunted and increasingly loudly voiced as they are: personal development, further education, law firm culture, teamwork, diversity, family support, the promotion of women and, of course, the allegedly so important criterion of work-life balance. Are there really no incentive models for young lawyers other than their salary? Or are talents in New York’s top law firms and in Big Law subject to special rules? Hardly likely. Think about the following: perhaps young lawyers are quite simply not bothered by their initial salaries, and they certainly wouldn’t mind working for a higher salary either.

It is regrettable that all this huffing and puffing about salaries seems to condemn everything else that accounts for a satisfactory and productive employment relationship to oblivion. There would be so much more than the salary to position oneself positively as an interesting and desirable employer in the labour market and thus to visibly demarcate oneself from competitors. The visibility and success linked to the first headline can only be claimed by the first law firm (i.e. Milbank, which by the way is continuously mentioned again when talking about this topic) – which can simply conceive of the costs caused by the salary rise as a marketing investment. All the others are stragglers and come away empty-handed. They should therefore rather think about whether they want to use this money elsewhere to become or remain attractive as an employer.

It is up to the law firms to decide how they want to be perceived by their employees and by potential applicants, i.e. what promise they want to make to try to recruit new talents. And it is up to young lawyers, in particular, to decide which employers they want to spend their working and living hours with. In any case, they leave a corresponding impression with clients and in the market.

I wonder now when the first law firm will breach the USD 200,000 limit. Allegedly, a New York IP boutique already wants to pay USD 210,000…

 

Photo by Alain Pham on Unsplash

 

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About the author
Prof. Dr. Bruno Mascello Vice Director of the Executive School of Management, Technology and Law at the University of St.Gallen, Director of the executive programme for lawyers “Management for the Legal Profession (MLP-HSG)”, attorney at law, lecturer and author dealing with various topics at the intersection of law and management.